Types of Life Insurance for Business

Safeguard the future of your business

A good and resilient business will have plans in place for many eventualities. The death or incapacitation of an owner, business partner, or key person is something that nobody can control—but you can have arrangements that will give your company the best chance at surviving such a tragic event.

Life insurance is relevant and important not only in a personal setting but also in a business context. There are different policy types available that offer peace of mind to business owners in varied situations. Finding the right cover to suit your nuanced situation can be tricky but there is something available to suit nearly every company—it’s just a matter of finding the right combination.

Being informed about the life insurance options available to your business and business owners, along with expert advice from an insurance broker, is the first step.

Here’s a rundown of the policies and benefits to look for when protecting your business.

Shareholder Protection Insurance

This cover is intended to allow shareholders and business partners to continue operations should one of them pass away or become incapacitated. In conjunction with a written agreement, it can allow the remaining partners and shareholders to buy out the shares and keep things running as they intended, while ensuring that the deceased partner or shareholder’s family or heirs receive a fair price.

Keeping a business running efficiently and effectively is a desired outcome that can protect jobs and the livelihoods of those who have invested time and money into the company. This insurance is a crucial aspect of planning for the future. It should be put in place alongside a legal arrangement that sets out the intentions of the partners for what should happen in the unfortunate event of a death or serious illness or injury.

Key Person Insurance

Intended for medium-sized or larger businesses, this type of policy recognises that there are often people that are crucial to the wellbeing of a company due to their unique expertise, knowledge, or experience. If you’re a business owner, partner, or shareholder, you may be able to think of one or two key people who are almost irreplaceable. There may be more than one and may include you as the owner, and that’s OK—you can take out policies for multiple key people.

Key person insurance has the business as a beneficiary and will pay out a lump sum or monthly installments after the loss of the key person. This can keep the business afloat by covering recruitment, training, loss of profit, contract penalties, and anything else necessary.

Income Protection Insurance

This one’s a great option for any working person, not just business owners. It protects your personal income should you become incapacitated and unable to earn. Not quite life insurance, but it falls under this umbrella.

Income protection is an important consideration, particularly if you are the primary income earner in your household. Each policy will state monetary amounts and time periods for which you would be covered.

Debt Protection and Business Expenses Insurance

Many owners and partners want to ensure that their business can continue to operate if they die or become incapacitated—their family may be dependent on the income. These two types of cover for businesses are another way to safeguard the future of a company when somebody dies, is injured, or falls ill.

Debt protection cover does exactly what the name indicates: it will pay off business loans if an owner dies, is diagnosed with a terminal illness, or is otherwise incapacitated. Business expenses cover will pay specified fixed business expenses for a set period if a small business owner, sole trader, or partner is unable to work more or their capacity is greatly reduced.

Employee benefits

Some companies offer their employees benefit packages. These often include insurance policies. Health insurance is a common employee benefit, but life, trauma and income protection insurance can also be included—something for a business to consider.

Which insurance policies would work best to safeguard the future of your business? It’s a great question, and the answer will depend on the individual operations and circumstances of the company. The best way to make sure you have what you need life insurance-wise is to consult a broker.

Insurance brokers, particularly those specialising in business insurance products, can ensure that you are getting the cover you need at the best price. Not only are they familiar with the varied insurance providers and the details of their policies and benefits, but they are experts in risk assessment and can help you to accurately determine the right “Goldilocks” level of cover—not too much, not too little.

If you’re looking to protect your business with life insurance, get a quote from Runacres. As local insurance professionals operating in Christchurch, Greymouth, West Coast, and Auckland, we are well-versed in helping Kiwi businesses get the coverage they need.